My Lords, this group of amendments considers the licensing of carbon dioxide transport and storage, and I thank everyone for their contributions. I will speak to Amendment 25, in my name, which relates to the definition of “decommissioning costs”. Carbon dioxide transport and storage licence holders will be expected to establish decommissioning funds for each of their transport and storage networks. These funds will accrue money over the operational life of the network to pay for the expected offshore decommissioning and post-closure costs associated with the network.

As originally drafted, the Bill enables the Secretary of State to make regulations about the provision of security for decommissioning in relation to carbon storage installations. This is to ensure that regulations could require relevant persons to provide security for costs that reflect the full range of decommissioning obligations that arise in relation to carbon transportation and storage activities.

Regulations will provide the framework for how the decommissioning funds are to ensure that the funding is secure and available when it is required to pay for the decommissioning and post-closure obligations. The costs are likely to be those associated with the obligations that the licence holder will have under the permit, which could include costs associated with preparatory works between closure and the commencement of decommissioning activities and post-closure monitoring.

As noble Lords will be aware, a series of amendments has been tabled relating to the financing of the decommissioning of carbon storage assets, and I look forward to the forthcoming debate on those amendments. Should our amendments be accepted to apply these decommissioning fund powers to the new defined term “decommissioning costs”, explained in Amendment 70, the previous definition of “decommissioning and legacy costs” becomes redundant and should therefore be omitted from Clause 11.

I will move on to the amendments tabled by noble Lords in this group. Amendment 17, tabled by the noble Lord, Lord Foulkes, and the noble Baroness, Lady Liddell, seeks to amend the scope of the prohibition on operating a CO2 transport and storage network without an economically regulated licence. Although there is an existing framework for the licensing of carbon dioxide storage activities, established under the Energy Act 2008, that Act provides for technical regulation to ensure the secure geological storage of carbon dioxide. It therefore does not provide any powers in relation to economic regulation.

The economic regulation and licensing framework for carbon dioxide transport and storage provided for in the Bill is intended to work alongside existing licence requirements in the Energy Act 2008. The economic regulation funding model allows a network operator, under the terms and conditions of a licence, to charge network users for delivering and operating the network—and the right to an “allowed revenue” that reflects its efficient costs and a reasonable return on the capital investment involved. In our view, this economic regulation model is appropriate for carbon dioxide transport and storage, given the natural monopoly characteristics of the infrastructure and assets. We recognise that, in the future, the market may evolve such that it may become appropriate for different licence types to be granted, with different conditions attached to those necessary first licences.

Amendment 18, tabled by the noble Lord, Lord Foulkes, and the noble Baroness, Lady Liddell, seeks to enable other forms of storage to be part of carbon dioxide transport and storage networks. Economic regulation is not currently considered appropriate for networks established to transport carbon dioxide for usage purposes, as we discussed in relation to similar amendments in the previous debate.

Amendment 20, also tabled by the noble Lord, Lord Foulkes, and the noble Baroness, Lady Liddell, aims to include provision for shipping, as well as any other method of non-pipeline transportation, within the scope of the economic licensing framework for the transport and storage of carbon dioxide. Subsection 2(3)(b) provides scope for alternative means of transportation to be included within the economic licencing framework, if that is appropriate in the future, by way of regulations. So the Government recognise the importance of non-pipeline methods of transporting carbon dioxide for storage to achieving decarbonisation across sectors of the economy.

However, although pipelines for the transportation of carbon dioxide and carbon dioxide geological storage sites currently have certain monopolistic characteristics, non-pipeline forms of transportation obviously do not share these attributes. Therefore, it is currently not considered necessary to economically regulate non-pipeline methods of carbon dioxide transportation, but we will of course keep this matter closely under review.

Amendments 21 and 22, tabled by the noble Lord, Lord Lennie, and the noble Baroness, Lady Blake, seek to make it clear that a licence can be granted to cover either carbon dioxide transportation or storage, or both. In our view, the flexibility to license these activities both together and separately is important, and I reassure both noble Lords that this is already the intent and allowed for in the drafting. The first licences are expected to cover the full carbon dioxide transport and storage network. However, in future it may become desirable to separately license constituent parts of a network.

Clause 7 provides for the granting of licences in relation to activities described in Clause 2, and as drafted it allows for licences to be granted in respect of either one or both types of activity. Additionally, there is a power in Clause 8 to enable different licence types to be specified, should that become desirable in the future.

I now move to address Amendments 23, 27 and 35, also from the noble Lord, Lord Lennie, and the noble Baroness, Lady Bennett. These amendments seek to place a responsibility on the Secretary of State to ensure that individuals obtaining a carbon dioxide transport and storage licence are “fit and proper”. These amendments place responsibility on the process of licence application, licence transfer and the special administrative regime. I support the aim of the noble Lord and noble Baroness to ensure the upmost standards for those wishing to engage in the transport and storage of carbon dioxide that will be needed to help us meet our net-zero target.

Of course, the granting of a licence pursuant to the Bill does not supersede or displace existing requirements for persons wishing to carry out activities relating to the storage of carbon dioxide to obtain the necessary storage permit. Such a permit may be granted where the relevant authority considers the applicant to be “technically competent” and “financially sound”, as set out in Regulation 7 of the Storage of Carbon Dioxide (Licensing etc.) Regulations 2010.

Clause 9(6) of the Bill provides powers for the Secretary of State to specify in regulations any considerations that should be taken into account before granting a licence, such as a successful application for a storage permit—which would also be required—or compliance with other preconditions that could constitute a fit and proper persons test. The safety of CCUS is underpinned by a strong regulatory framework that is in place precisely to mitigate any risks, with BEIS of course being guided by the relevant expert bodies in this matter. The department is currently developing licence terms that require the ultimate controller of the licensee to provide the necessary undertakings that it is a fit and proper person and anticipates testing this in advance of awarding any licence.

I thank the noble Lord, Lord Lennie, and the noble Baroness, Lady Blake, for their Amendment 24 to Clause 9, which seeks to amend the parliamentary procedure applying to regulations made under this clause from negative to affirmative. Regulations which may be made under Clause 9 would be very much procedural in their nature, and it is the Government’s firm view that the negative procedure is in this case entirely appropriate. Regulations could include conditions that future licence applications may be required to meet. For example, regulations could be produced to stipulate particular considerations for the economic regulator to take into account when it grants licences. However, decisions by the economic regulator and the Secretary of State under this part would, in any event, be bound by the principal objectives and general duties in Clause 1, which we discussed earlier.

Finally, I turn to Amendment 26 from the noble Lord, Lord Foulkes, and the noble Baroness, Lady Liddell, which seeks to clarify that the economic regulator may exercise discretion in whether to revoke a licence. Clause 17 is intended to ensure that persons with a material interest in the revocation of a carbon dioxide transport and storage licence are notified ahead of a licence being terminated. This facilitates, for example, a statutory transfer scheme being affected.

I hope I have been able to provide the necessary assurances to noble Lords and noble Baronesses. I thank them for helping us to test the robustness of the Government’s carbon dioxide transport and storage licensing frameworks and I hope that they will not press their amendments.